A grim outlook for hospitality as insolvencies rise by 95% in two years

03 November 2008 by
A grim outlook for hospitality as insolvencies rise by 95% in two years

A report by consultancy PricewaterhouseCoopers (PwC) showed that there were 281 business failures in the third quarter of this year, up from 175 last year and well ahead of the 220 insolvencies reported in the first quarter and the 212 recorded in the second. It was almost double the number reported - 144 - in the final quarter of 2006.

While pubs, bars and restaurants have been struggling for some time, the latest figures reflect the worsening climate for hotels, which have so far proved relatively resilient to the slowdown. Some 18 hotels failed in the third quarter, up from 10 in the same period last year.

This trend is likely to get worse as the combined impact of a reduction in business travel, conferences and leisure result in reduced demand and lower profitability, according to Stephen Broom, hospitality and leisure director at PwC.

"As the downturn tightens its grip, it is easy to believe what we have seen so far is just the tip of the iceberg for hotels," he said.

"Although hotel insolvencies have increased by over 150% from the end of 2006 to October 2008 there will be further failures in 2009 when the full impacts of reduced demand will be felt."

The report makes for grim reading for the pub and bar sector, with 64 businesses going under this quarter, an increase of 156% since the back end of 2006.

"There are no surprises that in the last year pub insolvencies have increased by 113%," Broom said.

"The majority of pubs suffering distress are wet-led community pubs losing out to supermarkets. Some have also found the competition from well known pub chains has had a detrimental effect as brand and familiarity become more important to consumers when personal expenditure is under pressure."

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By Daniel Thomas

E-mail your comments to Daniel Thomas here.

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